You have asked several questions regarding the effect of recent
legislation on the Optional Retirement Programs (hereinafter
O.R.P.) and Tax Sheltered Annuity Programs (hereinafter T.S.A.P.)
of state colleges and universities. You first ask whether the
conditions for benefit availability imposed by section 36.105 of
Title 110B, Public Retirement Systems, V.T.C.S., control the
availability of all O.R.P. benefits to participants in such a
program.

Because of recent statutory amendments, chapter 36 of Title
110B now permits the governing board of a state-supported college
or university to provide for contributions to or purchase of two
different types of investments on behalf of the O.R.P.
participants. The board may provide for contributions to any
type of investment authorized in section 403(b) of the Internal
Revenue Code, such as mutual funds or money market funds, or it
may provide for the purchase of fixed or variable retirement
annuities. Prior to 1981, a governing board administering an
O.R.P. could provide only for the purchase of annuities, not for
contributions to all investments authorized by section 403(b) of
the Internal Revenue Code. However, chapter 36 of Title 110B now
allows a choice of investments, according to the following
sections of the statute:

Section 36.002. Optional Retirement Program

(a) The optional retirement program established as provided
by this subtitle shall provide for contributions to any type of
investment authorized in Section 403(b) of the federal Internal
Revenue Code of 1954, 42 [sic] U.S. Code, as it existed on
January 1, 1981, and for the purchase of fixed or variable
retirement annuities that meet the requirements of that section
and Section 401(g) of the federal Internal Revenue Code of 1954,
42 [sic] U.S. Code, as amended.

. . . .

Section 36.004. Administration

(a) A governing board may provide for contributions to any
type of investment authorized in Section 403(b) of the federal
Internal Revenue Code of 1954, 42 [sic] U.S. Code, as it existed
on January 1, 1981, and may arrange the purchase of annuity
contracts from any insurance or annuity company that is qualified
to do business in this state.

As a result of the expanded investment authority of a governing
board, on O.R.P. participant may collect either annuity benefits
or other investment benefits. Your question involves the
availability of the different benefits to a participant in an
O.R.P.

Section 36.105 of Title 110B governs availability of benefits
under an O.R.P. That section defines termination of
participation in an O.R.P. and stipulates that benefits are
available to a participant only upon termination of
participation. The pertinent parts of the statute are as
follows:

(a) A person terminates participation in the optional
retirement program, without losing any accrued benefits, by:

(1) death;

(2) retirement; or

(3) termination of employment in all institutions of higher
education.

. . . .

(c) The benefits of an annuity purchased under the optional
retirement program are available only if the participant
terminates participation in the program as provided by Subsection
(a) of this section. (Emphasis added).

Although subsection (c) restricts the availability of annuity
benefits, it fails to restrict similarly the availability of
other investment benefits. Your question, then, is whether
subsection (c) should be interpreted as controlling the
availability of all investment benefits, or whether the benefit
availability restrictions of Internal Revenue Code section 403(b)
are controlling for benefits from investments other than
annuities.

We are of the option that I.R.C. section 403(b) is not
controlling and that section 36.105(c), Title 110B, Public
Retirement Systems, V.T.C.S., is controlling on the availability
of all investment or annuity benefits.

Section 403(b) of the Internal Revenue Code requires that a
custodial account to which qualified employers make contributions
on behalf of their employees restrict the availability of
benefits in order to have the contributed amounts obtain the
desired federal tax treatment. The relevant part of section
403(b) is as follows:

(7) Custodial accounts for regulated investment company
stock.

(a) Amounts paid treated as contributions.--For purposes of
this title, amounts paid by an employer described in paragraph
(1)(A) to a custodial account which satisfies the requirements of
section 401(f)(2) shall be treated as amounts contributed by him
for an annuity contract for his employee if--

(i) the amounts are to be invested in regulated investment
company stock to be held in that custodial account, and

(ii) under the custodial account no such amounts may be
paid or made available to any distributee before the employee
dies, attains age 59 1/2, separates from service, becomes
disabled (within the meaning of section 72(m)(7)), or encounters
financial hardship.

It is apparent that section 403(b) permits the conditions for
distribution of benefits from the custodial account to be less
stringent than the conditions for availability of benefits from
the O.R.P. itself. If the code section 403(b) conditions were to
apply to other investment benefits and the section 36.105
conditions were to apply to annuity benefits, there would be two
different availability standards for the benefits. There is
nothing in chapter 36 of Title 110B to indicate that the
legislature intended to have the different benefits available
according to different conditions. The legislature did not
expressly adopt the 403(b) standards for availability of other
investment benefits, just as it did not expressly expand the
scope of the availability restrictions in section 36.105 to
include other investment benefits. Thus, we are presented with
the question of which set of conditions, if any, can we infer
that the legislature intended to be controlling for the
availability of other investment benefits, since neither set of
conditions was expressly made applicable to those benefits.

The legislature certainly intended that some sort of
availability restrictions apply to any type of benefits that may
be distributed under an O.R.P. The purpose of the O.R.P.
legislation, as stated in section 36.001 of Title 110B, is to
establish a complete retirement program for faculty members
employed in state-supported colleges and universities as an
incentive to attract high quality faculties and improve the level
of education at the institutions. As evidenced by section
36.105, the legislature considers controls on the availability of
benefits to be a necessary part of a complete retirement program.
Our office has also considered such controls to be an important
part of an O.R.P. and a part necessary to achieving the program's
basic goals. Attorney General Opinion
H-1060 (1977)
stated that
benefits accumulated under an O.R.P. should not be available to a
participant prior to termination; to make contract benefits
available to participants before retirement would be inconsistent
with the purpose underlying retirement systems, which is to
provide security upon retirement. See Attorney General Opinion
H-532 (1975).
Thus, in order to preserve the financial integrity
of the O.R.P.'s and to carry out the express purpose of the
statute, the legislature certainly intended that the O.R.P. place
some type of restrictions on the availability of the newly
permitted investment benefits and that those restrictions limit
the availability of benefits to the time of termination of
employment.

Given that some restrictions should apply to the availability
of the other investment benefits and that the legislature did not
expressly make applicable the restrictions of either I.R.C.
section 403(b) or of section 36.105 of Title 110B, we consider it
more likely that the legislature intended to have the section
36.105 availability conditions apply to the other investment
benefits than to have the section 403(b) conditions apply.

According to Calvert v. British-American Oil Producing Company,
397 S.W.2d 839 (Tex. 1965), the intention of the legislature
should be ascertained from the entire statute, not isolated
portions thereof. Under section 36.105, the definition of
termination of participation is not restricted to employees
investing in annuities; it covers those contributing to the other
types of investments also. The only part of section 36.105 that
is restricted to annuity benefits is subsection (c), which
provides that those benefits are available only upon termination
as defined by section 36.105(a). Almost every provision of
chapter 36 applies with equal force to annuities and other
investments purchased under an O.R.P. The administration,
participation, and contribution provisions indicate that an
O.R.P. is to be operated under one set of guidelines, regardless
of the type of benefits that are forthcoming to its participants.
In the absence of some inherent reason to impose two different
benefit availability standards and in the absence of an
expression of intent by the legislature to do so, we conclude
that the legislature intended to maintain a single system of
regulation for the O.R.P.'s, including a single regulation for
benefit availability.

The more stringent standards for benefit availability under an
O.R.P. are not incompatible with the standards under I.R.C.
section 403(b). The terms of section 403(b) indicate that the
restrictions should be imposed by the custodial account itself as
minimum availability standards. Once those minimum standards
have been established, a program such as the O.R.P., through
which an employer makes contributions to the custodial account,
may itself establish availability criteria at least as stringent
or more stringent than those established by section 403(b) and
still be compatible with the Internal Revenue Code.

On the other hand, the less stringent provisions of Internal
Revenue Code section 403(b), if considered to be binding maximum
restrictions on O.R.P. benefits, would appear to be incompatible
with the general goal of the O.R.P. of creating a complete
retirement system that restricts benefit availability to the time
of termination. For example, under the financial hardship
provision of section 403(b), an employee might be able to obtain
investment benefits for the purpose of purchasing a residence or
providing higher education for his or her children. See H.R.
Conf. Rep. No. 95-1800, reprinted in [1978] U.S. Code Cong. and
Ad. News 7198, 7218. Such a situation would frustrate the
O.R.P.'s goal of providing a retirement program and would render
meaningless the idea of retirement benefits as pay withheld to
induce continued faithful service. Teacher Retirement System v.
Duckworth, 260 S.W.2d 632 (Tex. Civ. App.--Fort Worth 1953),
aff'd, 264 S.W.2d 98 (Tex. 1954). The purpose of a teacher
retirement system, for which the O.R.P. provides an alternative
type of investment, is to provide support for teachers after
their teaching days are over. Duckworth, supra. The legislative
intent in creating such a system was to provide security for
teachers and to encourage qualified persons to become and remain
teachers in the public schools. Woods v. Reilly, 218 S.W.2d 437
(Tex. 1949).

In light of such intent and purposes, statutes regulating
retirement programs or systems should be construed liberally in
order to carry out the whole purpose of the plan. Woods, supra.
In State v. Standard Oil Company, 107 S.W.2d 550 (Tex. 1937), the
court stated that when the purpose of a statute is ascertained,
the meaning of words used may be restricted or enlarged or words
may be disregarded to give the statute the meaning that
effectuate its purpose. Thus, we read section 36.105 of Title
110B to mean that benefits under the optional retirement program
are available only upon termination of participation; the word
'benefits' refers to those from an annuity or from other
available investments.

The bill analysis to the legislation which first enacted the
language now codified as section 36.105 supports our conclusion.
House Bill No. 1719 of the Sixty-seventh Legislature amended
section 51.358 of the Education Code, now codified as section
36.105. Acts 1981, 67th Leg., ch. 441, at 1864. The portion of
the bill analysis entitled Purpose/Synopsis states as follows:

The optional retirement program for faculty members at public
institutions of higher learning, in which both employer and
employee contribute into the individual's retirement account, at
set rates is, under this bill, freed from being used only for the
purchase of retirement annuities and may be used to make any type
of general investment authorized in section 403(b) of the IRS
Code of 1954.

There may be not only different investment plans set up for
each institution, but for each component of an institution.

An individual may collect the full benefits of these plans
only if he or she dies, retires or terminates employment due to
disability. Otherwise, the employee may withdraw only his or her
accumulated contributions. (Emphasis added).

This item of legislative history indicates that the legislature
intended the benefits of all plans under the O.R.P. to be
available only upon death, retirement, or termination of
employment.

Your second question asks whether the board of regents may
define the term 'financial hardship' that is used in the
Internal Revenue Code, if the availability of O.R.P. investment
benefits is governed by I.R.C. guidelines. Our answer to your
first question renders unnecessary an answer to this question.

You next ask whether the companies offering expanded investment
opportunities under an O.R.P. or T.S.A.P. are required by law to
be 'qualified and admitted to do business' in the State of Texas.
Neither article 6228a-5, V.T.C.S., which authorizes the operation
of a T.S.A.P., nor chapter 36 of Title 110B, V.T.C.S., which
authorizes the operation of an O.R.P., specifically requires that
a company offering 403(b) investments be qualified and admitted
to do business in the state, although chapter 36 does require
that an insurance or annuity company selling the annuity
contracts must be 'qualified' to do business here. We are of the
opinion that the legislature did not intend that a company
offering the 403(b) investments meet the same 'qualifications' to
do business in the state as an insurance or annuity company.

An insurance company that is offering annuities to participants
in an O.R.P. or T.S.A.P. must be authorized to do business in
this state and becomes authorized to do so by meeting certain
financial and administrative requirements and then obtaining the
approval of the State Board of Insurance to begin operations. We
do not believe that the companies offering the other kinds of
investments under 403(b) will, simply by virtue of offering such
investments, be acting as insurance companies. Thus, there is no
authorization for the State Board of Insurance to require those
companies to 'qualify' under the Insurance Code to do business as
insurers in this state. We therefore cannot assume that the
legislature, through either chapter 36 or article 6228a- 5,
intended to impose the same requirement of being qualified to do
business in Texas on the companies offering the expanded
investment opportunities as are imposed on insurance and annuity
companies, because the qualifications, as they relate to an
insurance company, would be inherently inapplicable to a company
presumably not involved in an insurance business. Of course, if
the company were to be engaged in an insurance business, as well
as engaged in the sale of the 403(b) investments, the provisions
of the Insurance Code would be applicable of their own accord,
without resort to either chapter 36 or article 6228a-5.

Your question under review at this point is phrased in terms of
whether companies are required 'by law' to be qualified and
admitted to do business in the state. You do not request us to
address any particular law or laws. Although we are of the
opinion that the O.R.P. and T.S.A.P. laws do not specifically
require such companies to be qualified and admitted to do
business in the state, the laws regulating foreign corporations,
as well as the laws regulating the sale of securities, would be
applicable to such companies. The Texas Securities Act, article
581-1 et seq., V.T.C.S., and the regulations promulgated
thereunder, in particular regulation under 7 T.A.C. s 123.1
(1980), the administrative guidelines for registration of open-end investment companies, requires registration of securities
sold in this state. Article 8.01 of the Texas Business
Corporation Act requires a foreign corporation to obtain a
certificate of authority before being allowed to transact
business in the state. These statutes to the extent applicable
to a particular company, require a company offering the expanded
investment opportunities to be 'qualified' to do business in the
state of Texas. Furthermore, there may be other statutes, the
application of which depends upon the activities of the company,
that may affect the operation of these companies. Without
particular facts, we cannot state that no laws other than those
specifically mentioned will affect these companies.

In light of the wide-ranging regulation afforded by the laws of
this state, a company offering the 403(b) investments does
subject itself to statutes requiring some sort of 'qualification'
for the company to do business in this state, even though neither
article 6228a-5, V.T.C.S., nor chapter 36 of Title 110B,
V.T.C.S., specifically require such qualification. In your
fourth question you have asked whether the board of regents may
require such qualification to do business or the posting of some
sort of bond if the law does not require such qualification.
Because we are of the opinion that various statutes do require
the investment companies to be qualified to do business in this
state, we do not consider it necessary to answer your fourth
question.

SUMMARY

The availability of benefits under an O.R.P. is regulated by
section 36.105 of Title 110B, V.T.C.S., regardless of whether
those benefits are annuity benefits or other investment benefits.
Neither chapter 36 of Title 110B, V.T.C.S., nor article 6228a-5,
V.T.C.S., specifically require a company offering the expanded
investment opportunities to be 'qualified' to do business in the
state; however, those companies remain subject to the laws
generally regulating corporations transacting business in this
state and the laws regulating the sale of securities in this
state.